impact of foreign interest rates on the economy
Subtitle: the role of the exchange rate regime
By: Julian di Giovanni, Jay C. Shambaugh.
Contributors: Shambaugh, Jay C.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13467.; Working paper series (National Bureau of Economic Research) -- working paper no. 13467.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 44
Subjects: Foreign exchange rates; Interest rates -- Econometric models; International trade
Description: It is often argued that many economies are affected by conditions in foreign countries. This paper explores the connection between interest rates in major industrial countries and annual real output growth in other countries. The results show that high foreign interest rates have a contractionary effect on annual real GDP growth in the domestic economy, but that this effect is centered on countries with fixed exchange rates. The paper then examines the potential channels through which major-country interest rates affect other economies. The effect of foreign interest rates on domestic interest rates is the most likely channel when compared with other possibilities, such as a trade effect.
Notes: "October 2007"

Includes bibliographical references (p. 22-24).

Also available in PDF from the NBER World Wide Web site (www.nber.org).